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Uttar Pradesh Electricity Regulatory Commission Rooftop Solar PV Grid Interactive Systems Gross & Net Metering Regulations January 2019
IEA-PVPS T13-01 2014 Review of Failures of Photovoltaic Modules Final – Performance and Reliability of Photovoltaic Systems
MINISTRY OF NEW AND RENEWABLE ENERGY NOTIFICATION
New Delhi, the 4th January, 2019
S.O. 46(E).—whereas the Central Government had issued “Solar Photovoltaics, Systems, Devices and Components Goods (Requirements for Compulsory Registration) Order, 2017“ vide S.O. 2920(E) dated 5th September, 2017 for six products included in the Schedule with the date of coming into force with effect from 5th September, 2018. Andwhereas, after having discussions with the various stakeholders including the Bureau of Indian Standards (BIS), the date of coming into force of the said Order was advanced to 16th April, 2018 on the condition of self-certification by manufacturers for products at Sl. No. 1-3 in the Schedule annexed to the order applicable till 30th June, 2018 published in Gazette of India notified on 16th April, 2018 vide S.O. 1602(E), which was revised vide S.O. 2183(E) published in Gazette of India on 30.05.2018.
2. And whereas, the industry had sought more time for compliance to the order and whereas the issues involved were discussed with related stakeholders, the self-certification was extended to 4th September, 2018 vide S.O. 3449(E) published in Gazette of India on 13.07.2018, which was further extended to 20th September 2018 for all products listed in the order vide S.O No. 4787(E) published in Gazette of India on 12th September 2018, and further to 1st January 2019 from 20th September, 2018 videS.O. 5259(E) dated 12.10.2018 for all items with dates of implementation indicated against each product in the Schedule annexed for smooth implementation of the order.
3. And whereas, the issues related to testing of inverters (items 4-5) was discussed with industry and test labs recognized by BIS, it is hereby notified that the date of self- certification relaxation for these items stands extended by six months i.e. up to 30th June 2019 subject to the condition that such manufacturers should have valid IEC and test reports from international test labs corresponding to IS. These manufacturers will be allowed self-certification without submitting samples to test labs as the series guidelines for submitting samples to test labs are under preparation.
[F. No. 223/36/2018-Quality Control] Dr. B. S. NEGI, Adviser/Scientist ‘G’, MNRE
GOVERNMENT OF ANDHRA PRADESH ABSTRACT
ENERGY, INFRASTRUCTURE & INVESTMENT DEPARTMENT – Development of Solar Power in Andhra Pradesh – Andhra Pradesh Solar Power Policy-2018 – Orders – Issued.
ENERGY, INFRASTRUCTURE & INVESTMENT (PR.II) DEPARTMENT
Dated: 03-01-2019 Read the following:
1. G.O.Ms.No.39, Energy (Res) Deptt., dated 26.09.2012.
2. G.O.Ms.No.44, Energy (Res) Deptt., dated 16.11.2012.
3. G.O.Ms.No.8, Energy,I&I( Pr.II) Deptt., dated.12.02.2015.
4. The VC&MD, NREDCAP, File No.NREDAP-14023/1/2018.
5. The GA( Cabinet ) Dept., U.O.Note.No.538/2018, dated:27.12.2018.
The Government of Andhra Pradesh had earlier issued the “Andhra Pradesh Solar Power Policy, 2015” vide G.O.Ms.No.8 dated 12.02.2015 to promote solar power generation in the State. Considering the good Solar Power potential existing in the State, the capacity addition achieved so far, the falling in solar tariffs in the recent times, etc., there is need to bring out New Solar Power Policy duly taking into consideration the recent developments in the Solar power sector.
2. Government, after detailed discussions on the proposal received in the reference 4th read above, with various stake holders viz., APTRANSCO, APDISCOMS, NREDCAP, Solar Power Developers and Solar Manufacturers Associations, hereby issue the Andhra Pradesh Solar Power Policy-2018 superseding the earlier Policy issued in G.O 3rd read above, as mentioned below:
ANDHRA PRADESH SOLAR POWER POLICY – 2018
India is blessed with abundant sunshine and solar power is expected to play a critical role in meeting the energy needs of the country in the long run. Solar power projects can be setup in a much shorter timeframe when compared to conventional power projects and the cost of solar power has become more economical today . Solar power can also help meet energy requirements for both grid connected as well as off-grid applications such as solar powered agricultural pumpsets.
Andhra Pradesh is poised for rapid industrial growth driven by infrastructure investments and has also been selected by Ministry of Power as one of the pilot states for implementation of the 24X7 – Power for All (PFA) scheme. Solar energy can become an important source in meeting the growing power requirements of the State.
AP has large agriculture consumption constituting around 24% of the total energy consumption of the State. Solar power can also help shift the agriculture load and meet the power demand during the day time.
The State government is keen to tap the immense solar potential and promote this clean source of energy to meet the rising energy requirements of the State. The following factors make Andhra Pradesh an ideal location for setting up Solar Power Projects:
• Availability of about 300 sunny days in a year with solar insolation of more than 5 kWh/m2/day.
• Amongst the best performing power distributing companies in India (APEPDCL and APSPDCL).
• An efficient and strong evacuation infrastructure that can facilitate distributed generation.
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The Government of Andhra Pradesh had earlier issued the “Andhra Pradesh Solar Power Policy – 2012” vide G.O.Ms.No.39 dated 26.09.2012 and G.O.Ms No.44 dated 16.11.2012 and again issued “Andhra Pradesh Solar Power Policy, 2015” vide G.O.Ms.No.8 dated 12.02.2015 to promote solar power generation in the State. The Andhra Pradesh Solar Power Policy, 2015 which provided many fiscal incentives for large scale promotion of projects helped in aggressive capacity additions and thereby driving the cumulative installed capacity of solar power in the state to 2515.78 MW. This policy was particularly supported with fiscal incentives because the cost of power from solar was way higher than the average power purchase cost of the state during 2014-15. But seeing the current trend of falling solar prices which is way less than Rs.3 per unit at present, it is felt necessary to revisit the clauses and come out with a new comprehensive policy for the promotion of solar power to meet the demand for power in an environmentally sustainable manner.
To meet the twin objectives of energy security and clean energy considerations, this policy aims to promote widespread usage of solar power and to meet the following objectives.
1. To target a minimum total solar power capacity addition of 5,000 MW in the next five years in the State with a view to meet the growing demand for power in an environmentally sustainable manner.
2 To develop solar park(s) with the necessary utility infrastructure facilities to encourage developers to set up solar power projects in the State.
3 To promote distributed generation that can help in avoiding upstream network cost and contribute towards loss reduction.
4 To deploy solar powered agricultural pumpsets and meet power requirements of farmers during day time.
5 To promote local manufacturing facilities which will generate employment in the State.
1. Operative Period
This policy shall come into operation with effect from the date of issuance and shall remain applicable for a period of five (5) years and/ or shall remain in force till such time a new policy is issued.
Solar Power Projects (SPP) that are commissioned during the operative period shall be eligible for the incentives declared under this policy, for a period of ten (10) years from the date of commissioning – unless otherwise the period is specifically mentioned for any incentive.
2. Eligible Developers
All registered companies, Government entities, partnership companies/firms, individuals and all consumers of APDISCOM(s) will be eligible for setting up of Solar Power Projects within the State for sale of electricity/captive use, in accordance with the Electricity Act – 2003, as amended from time to time. The entity desiring to set up Solar Power Project shall intimate the Nodal Agency as per the para (5) of this policy and also submit the DPR of the project with the details of technical and financial capabilities of the developer, based on which the Nodal Agency will allocate the capacity for development.
Before allocating the capacity for development, the Nodal agency shall apprise whether the proposal is technically, financialy and commercially feasible. Nodal agency shall also apprise whether proposer has the required technical, commercial, managerial and financial capability to execute the project. Nodal agency shall apprise the existing installed capacity, existing generating capacity, required installed capacity and generating capacity.
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3. Solar Power Projects
A. Sale of power to AP Discom(s)
The Government will promote setting up of Solar Power Projects for sale of power to APDiscoms. It is envisaged that the Discoms would procure around 2,000 MW of solar power capacity in a phased manner within the next five (5) years depending on the requirement in the State. The Discoms would enter into long term PPA of 25 years with developers who are selected based on a competitive procurement process as per the tariff based competitive bidding guidelines notified by the Ministry of Power. As per the communication vide DO Lr No. 8/7/2017-EFM, dt 12.01.2018, the MNRE has informed that the competitive bidding guidelines for solar power does not cover projects below 5 MW capacity for intra-state and accordingly the procurement of power from solar power projects having capacity less than 5 MW shall be at Feed in Tariff (FiT) determined by AP Electricity Regulatory Commission to the extent power required within the State.
B. Third party sale / Captive use
The government will encourage solar power producers to set up Solar Power Projects for captive use within the State or third party sale within and outside the State of Andhra Pradesh. These projects will also qualify for Renewable Energy Certificates (RECs) subject to applicable regulations/ guidelines issued by the appropriate commission.
C. Solar Parks
The Government of A.P will develop initially 4000 MW capacity Solar Parks.The State Government, under this policy, will help facilitate in building up the necessary infrastructure like power evacuation, water requirements and internal roads.
Solar Park shall consist of various zones viz. Solar Power Projects, Manufacturing Zones, R & D and Training Centres. The State will extend all facilities and fiscal incentives provided by Central Government/ National Solar Mission to the manufacturers in Solar Parks.
Special Purpose Vehicle(s) (SPV’s) will be established for development of infrastructure and management of Solar Park. The SPV will formulate Policy and Rules in respect of land allotment, sharing of development cost by the solar power producers and manufacturers. The SPV will develop the initial infrastructure from the funds allocated by GoI and GoAP, which will be subsequently recovered from the solar power producers whose projects are located in Solar Parks by levying development charges.
D. Solar Rooftop Projects – Gross/Net Metering
The Government will promote solar rooftop systems on public buildings, domestic, commercial and industrial establishments on gross and or net meter basis. The consumer(s) are free to choose either net or gross meter option for sale of power to Discom under this policy. The applicable tariff for either of the cases shall be equal to the average pooled power purchase cost which will be determined by APERC for the year during which the project is synchronized with the grid and the applicable tariff at the time of CoD will be paid for 25 years, in case of projects executed under both net metering and gross metering basis.
The above tariffs shall be applicable for a period of 25 years for Eligible Developers who set up solar rooftop projects within the Operating Period of this policy.
The Obligated Entities as per the RPPO Regulations of APERC, are eligible for adjusting the power generated from rooftop projects towards their obligation to meet RPPO provided necessary metering is arranged for measuring the solar power as per the regulations of APERC.
The metering facility will be extended for all Eligible Developers who intend to setup solar photovoltaic plants at their premises. Eligible Developers who wish to avail the metering facility will have to apply through online mode to the Discoms – either on their websites and/or through designated mee seva / customer service centres. All approvals/clearances shall be disposed by the respective Discom within 14 days from the date of application The projects of capacity upto 1000 KWp at a single location will be permitted.
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The projects set up on the roofs of the buildings and also in the open areas within the premises of the consumer are categorized as solar rooftop projects, as per the guidelines of MNRE. In case of different rooftops belong to single owner in a city or town, the combined solar power generation will be adjusted against the combined consumption recorded in various energy meters.
Permission will be given to the group of persons/societies to set up Solar Power Projects and will be treated as collective generation for supply of power to the households of each society /group member. The DISCOMs will deduct the above energy from the consumed energy of individual service connections and balances (either excess or lower) can be billed on net metering basis. No Distribution losses and charges will be collected from the Group/Society/ individuals by the DISCOMs.
Eligible Developers are allowed to avail the relevant subsidies and incentives from MNRE under JNNSM scheme. The eligible subsidy for net metering systems may be processed through NREDCAP (Nodal agency) or Channel Partners of MNRE, GOI. The sanction and release of the subsidy will be as per the guidelines issued by MNRE from time to time.
The modalities for implementing the rooftop policy including metering, billing, settlement, payment(s) and technical aspects etc. shall be issued by APEPDCL within 30 days from the date of issue of this policy, which would be followed by all DISCOMS in the State.
E. Solar pumpsets
The State government in collaboration with the Central Govt/MNRE /MOP/Multilateral agencies will undertake measures to enable gradual replacement of conventional pumpsets to solar powered pumpsets through subsidy support. Nodal agency will facilitate with government agencies for availing subsidies, grants and/ or incentives on behalf of APDiscoms.
It is envisaged that 50,000 solar powered pumpsets will be operational in the State in the next five years without any additional financial burden on the farmers. The modalities of the scheme will be developed in consultation with all the stakeholders within 30 days from the date of issue of this policy.
The Government will encourage Grid Connected Solar Pump sets to benefit the farmer community by way of sale of surplus energy to the DISCOMs.
4. Incentives from the State Government
To enable solar power capacity addition in the State, following incentives shall be provided for Eligible Developers for those projects setting-up during the operative period mentioned in the para one (1).
a) Transmission and Distribution charges for wheeling of power
Transmission and Distribution charges shall be exempted only for connectivity to the nearest Central Transmission Utility (CTU) via State Transmission Utility (STU) network for inter- state wheeling of power subject to the consent of APERC.
b) Energy Banking
Banking of 100% of energy shall be permitted during all 12 months of the year, based on the feasibility and prior approval of APTRANSCO/APDISCOMs. Banking charges shall be adjusted in kind @ 5% of the energy delivered at the point of drawal. The banking year shall be from April to March.
Drawals from banked energy shall not be permitted during five (5) month period from 1st April to 30th June and 1st February to 31st March of each financial year. In addition, drawls of banked energy during the Time of the Day (ToD) applicable during the peak hours, as specified in the respective Retail Supply Tariff Order, shall also not be permitted throughout the year. However, the provisions on banking pertaining to drawal restrictions shall be reviewed based on the power supply position in the State.
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Energy injected into the grid from date of synchronization to Commercial Operation Date (COD) will be considered as deemed energy banking. The unutilized banked energy shall be considered as deemed purchase by Discoms at 50% of the Average Pooled Power Purchase Cost as determined by the APERC for the applicable year. Energy settlement shall be done on monthly basis.
The payment for the deemed purchase of un-utilized banked energy shall be capped to 10% of the total banked energy during the applicable year.
c) Open Access
Intra-state Open Access clearance for the whole tenure of the project or 25 years whichever is earlier will be granted as per the APERC Regulations amended from time to time. In absence of any response or intimation from the Nodal Agency to the generator within 21 days, then such application shall be considered to be deemed open access.
d) Renewable Energy Certificate (REC)
All projects developed with the above incentives will be eligible for REC benefits subject to applicable regulations/orders of the appropriate commission. Deemed injection into the grid for in-house/co-located solar generation will also be eligible for REC benefits subject to applicable guidelines.
e) Grid Connectivity and Evacuation facility
The power generated from a Solar Power Project shall be injected at an appropriate voltage at the sub-station and/or interconnection point of the APTransco / Discom(s). The Eligible Developer shall bear the entire cost of construction of power evacuation facilities from the project upto the interconnection point and/or upto APTransco / Discom(s) substation.
The Eligible Developer shall abide by the orders, rules, regulations and terms and conditions as approved by the Commission from time to time for operation of Solar Power Projects, power evacuation, transmission and wheeling of energy. Solar Power Projects will be exempted from paying the Supervision charges to APTransco/Discom(s) only in case of transmission of power from State Transmission Utility (STU) to Central transmission utility (CTU).
APTransco /Discom(s) will dispose the proposals for the technical feasibility for evacuation within 14 days from the date of receipt of application. Any upstream system strengthening requirement shall be borne by APTransco/Discom(s) on a priority basis.
f) Deemed Industry Status
Generation of electricity from Solar Power Projects shall be treated as eligible industry under the schemes administered by the Industries Department and incentives available to industrial units under such schemes shall be available to the solar power producers. The services of single desk portal can be made available for obtaining time bound statutory clearances.
g) Deemed Public Private Partnership (PPP) Status
Deemed PPP status shall be provided for projects coming up under category (A) as per para (3) of this policy.
h) Non Agriculture Status
Deemed Non-Agricultural (NA) status for the land where Solar Power Projects will be accorded, on payment of applicable statutory fees.
i) Must run status
Injection from Solar Power Projects shall be considered to be deemed scheduled.
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It is the responsibility of the project developer to acquire the land required for the project. However, in case of land owned by Revenue Department, the land allotment shall be done as per the prevailing government policy.
To facilitate faster execution of projects, the District Collector shall hand over advance possession of land including path ways to NREDCAP and the land shall be allotted on alienation basis to NREDCAP by fixing reasonable market value. After getting advance possession of the land, NREDCAP will allow the developer to start the construction duly taking necessary undertakings. NREDCAP shall enter into lease agreement with the developer once the project is commissioned.
NREDCAP will pay the land cost as decided to the revenue authorities @ 10% of the market value for a period of 10 years.
NREDCAP will collect the lease rentals for 25 years period @10% of the value of land with 10% increase in every 5 years block period, from the project developer from the date of commissioning of project and shall utilize for the payment to the Revenue authorities towards land cost and promotion of renewable energy and other new green and clean technologies in AP State.
k) Pollution Clearance
Solar PV power projects will be exempted from obtaining any NOC/Consent for establishment under pollution control laws from AP Pollution Control Board.
5. Nodal Agency
New and Renewable Energy Development Corporation of A.P. Ltd (NREDCAP) shall act as a Nodal Agency under this policy and as decided by the government from time to time.
The Nodal Agency and/or designated offices by the Nodal Agency shall be responsible for the following activities:
a) Facilitate in obtaining revenue land – wherever is required.
b) Facilitate in getting power evacuation and/ or Open Access as per the
regulation issued by APERC and amended from time to time.
c) Facilitate water allocation from concerned departments.
d) Facilitate and process of proposals for availing subsidy for solar rooftop
systems as per MNRE guidelines.
e) Co-ordinate with MNRE/SECI/APTransco/Discom(s) and any other
Central/State agencies in obtaining necessary clearances, approvals, grants and subsidies.
6. Administrative approval
The applications received from the Eligible Developers as per the provisions of this policy should be in the prescribed format along with a registration fee of Rs.1000 for capacities upto 5 KWp; Rs. 5,000 for capacities above 5 KWp to 100 KWp; Rs,10,000 for capacities above 100 KWp to 1000KWp and Rs.25,000 per MW for capacities more than 1000 KWp. In addition, a facilitation fees of Rs 25 per kW shall be applicable for the Eligible Developer who seeks assistance from the Nodal Agency for obtaining single window clearance support as per the above para.
The projects set up under solar parks developed by the Government are exempted from registration of the projects with the State Nodal Agency.
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7. Project Monitoring Committee
A “High Level Committee” constituted with the following members will monitor the progress of implementation of the Solar Power Projects cleared under the policy:
1. Principal Secretary, Energy Department
2. Chairman and Managing Director, APTransco 3. CMD of APDiscom(s)
4. VC & MD, NREDCAP( Member-Convener)
5. Representative of FAPCCI/CII
6. Representatives (2) of solar power developers
If any difficulty arises in giving effect to this policy, the High Level Committee is authorized to issue clarification as well as interpretation to such provisions, as may appear to be necessary for removing the difficultly either on its own motion or after hearing those parties who have represented.
8. Solar Manufacturing
The Government intends to promote solar manufacturing facility that can help develop the solar eco-system and support job creation potential in the State. The following incentives shall be applicable for new manufacturing facilities and equipment’s, ancillaries related to Solar Power Projects only.
- Priority allotment of Government land in solar parks on long term lease basis
- Exemption from electricity duty for a period of ten (10) years
- Incentives as applicable as per the prevailing industrial promotion policies of the GoAP,subject to provision of the separate budget by the Energy Department for the same. The services of single desk portal can be made available for obtaining time bound statutory clearances.
- Preference for Off take of power, PE connectivity and to extend energy banking facility for the projects developed by the manufacturers.9. Mid-Term Review
State Govèrnment may undertake a mid-term review of this policy after a period of two years or as and when need arises in view of any technological breakthrough or to remove any inconsistency with Electricity Act 2003, rules and regulations made there under or any Govt. of India policy.
10. Power to remove difficulties
If any difficulty arises in giving effect to this policy, energy department is authorized to issue clarification as well as interpretation to such provisions, as may appear to be necessary for removing the difficulty either on its own motion or after hearing those parties who have represented for change in any provision.
(BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH)
PRINCIPAL SECRETARY TO GOVERNMENT
The Vice Chairman & Managing Director, NREDCAP, Tadepalli, Guntur. The Chairman, APPCC, Vijayawada.
The Chairman & Managing Director, APTRANSCO, Vijayawada.
The Managing Director, APGENCO, Vijayawada.
The Secretary, APERC, Hyderabad
The CMDs, of APSPDCL, Tirupathi / APEPDCL, Visakhapatnam.
All Collectors & District Magistrates in the state.
The Principal Secretary to Government, Revenue Department.
The Principal Secretary to Government, Industries Department
The Principal Secretary to Government, EFS&T Department.
Copy to :-
The Prl., Secretary to Hon’ble C.M.
The Principal Secretary to Govt., Finance (FMU-Energy,I&I ) Department. The Secretary, LAW Dept.,
The OSD to C.S.
The OSD to Minister (Energy)
The P.S. to Prl., Secretary, Energy, I&I Department.
The Adviser for Power Sector.
The GA( Cabinet ) Dept.,
Sf/Sc ( C.No.2584/Power.II(2)/2014- Computer No.212428)
// FORWARDED : : BY ORDER //
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Recommendations made during 31stMeeting of the GST Council held on 22ndDecember, 2018 (New Delhi)-Rate changes
GST Council in the 31stmeeting held on 22ndDecember, 2018 at New Delhi took following decisions relating to changes in GST rates on goods and services. The decisions of the GST Council have been presented in this note for easy understanding. The same would be given effect to through Gazette notifications/ circulars which shall have force of law.
- GST rate reduction on goods which were attracting GST rate of 28% :
- 28% to 18%
- Pulleys, transmission shafts and cranks, gear boxes etc., falling under HS Code 8483
- Monitors and TVs of upto screen size of 32 inches
- Re-treaded or used pneumatic tyres of rubber;
- Power banks of lithium ion batteries. Lithium ion batteries are already at 18%. This will bring parity in GST rate of power bank and lithium ion battery.
- Digital cameras and video camera recorders
- Video game consoles and other games and sports requisites falling under HS code 9504.
- 28% to 5%
- Parts and accessories for the carriages for disabled persons
- GST rate reduction on other goods,-
- 18% to 12%
- Cork roughly squared or debagged
- Articles of natural cork
- Agglomerated cork
- 18% to 5%
- Marble rubble
- 12% to 5%
- Natural cork
- Walking Stick
- Fly ash Blocks
- 12% to Nil:
- Music Books
- 5% to Nil
- Vegetables, (uncooked or cooked by steaming or boiling in water), frozen, branded and put in a unit container
- Vegetable provisionally preserved (for example by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), but unsuitable in that state for immediate consumption.
- GST on solar power generating plant and other renewable energy plants
- GST rate of 5% rate has been prescribed on renewable energy devices & parts for their manufacture (bio gas plant/solar power based devices, solar power generating system (SGPS) etc) [falling under chapter 84, 85 or 94 of the Tariff]. Other goods or services used in these plants attract applicable GST.
- Certain disputes have arisen regarding GST rates where specified goods attracting 5% GST are supplied along with services of construction etc and other goods for solar power plant.
- To resolve the dispute the Council has recommended that in all such cases, the 70% of the gross value shall be deemed as the value of supply of said goods attracting 5% rate and the remaining portion (30%) of the aggregate value of such EPC contract shall be deemed as the value of supply of taxable service attracting standard GST rate.
Reduction in GST rates/exemptions on services:
- GST rate on cinema tickets above Rs. 100 shall be reduced from 28% to 18% and on cinema tickets upto Rs. 100 from 18% to 12%.
- GST rate on third party insurance premium of goods carrying vehicles shall be reduced from 18% to 12%
- Services supplied by banks to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) shall be exempted.
- Air travel of pilgrims by non-scheduled/charter operations, for religious pilgrimage facilitated by the Government of India under bilateral arrangements shall attract the same rate of GST as applicable to similar flights in Economy class (i.e. 5% with ITC of input services).
The decision to tax the ‘service’ provided to solar developers at the full rate comes days after India’s Supreme Court upheld the federal government’s imposition of a 25% safeguarding duty on Chinese and Malaysian panels.
Hot on the heels of the recent Supreme Court ruling in favor of the 25% safeguarding duty on imported solar panels, India’s PV industry has suffered a fresh blow with the imposition of an 18% goods and services tax (GST) rate for solar projects.
The news prompted a swift response from the domestic PV industry, which has lobbied government to intervene and lower the tax burden, and has threatened lengthy legal action if the federal authorities stand firm.
Dismissing a demand from developers to be taxed at 5%, Maharashtra state’s appellate authority for advance ruling (MAAR) set 18% as the GST level for solar projects, following the example of its Rajasthan counterpart.
According to the ruling, though solar panels and related equipment attract GST at the concessional rate of only 5%, developers who employ contractors to supply panels and set up projects are receiving a ‘service’, and hence should pay the 18% applicable.
The Supreme Court had already ruled solar power plant would be considered immovable property and thus attract 18% tax under a ‘works contract’.
With the electricity generated by solar falling outside the purview of GST, the tax burden will be borne by developers and would inevitably be expected to filter through into tariff bids in PV auctions as a result.
Before India introduced GST, the solar sector enjoyed concessions for excise and customs as well as VAT. The 15% service tax was typically applicable on only around 10% of a project’s cost meaning, in effect, the net tax in the pre-GST regime was lower than 5%.
Source: PV Magazine
India needs to accelerate the growth of its rooftop solar sector. Of the 40 GW of rooftop solar installations targeted by 2022, the country has only achieved 2 GW to-date. This slow progress may hinder the country’s ability to reach its overall solar targets and meet its energy demand.
Presently in India, there are two dominant business models for rooftop solar: the capital expenditure (CAPEX) model, which has an approximate 75%
of market share, and the renewable energy supply company (RESCO) model, which accounts for 22%
of rooftop installations. These models work fine for larger commercial and industrial (C&I) players who have access to upfront capital, or can obtain commer- cial loans. However, rooftop solar remains constrained among smaller C&I players, micro, small and medium enterprises (MSME), and residential customers due to lack of financial resources and inability to access debt.
A CAPEX model with a commercial loan for the off- taker is a potential solution for these categories of cus- tomers. This model has proven effective with large scale implementation across Europe and the U.S.
This proposed model is similar to the existing the CAPEX model, where the customer makes the upfront payment to finance the solar assets. This payment
is, however, financed by a mix of the customer’s own equity and a commercial loan taken directly by the customer.
In this report, we assess the viability of the CAPEX loan model with a focus on the MSME sector, identify barriers to uptake, and recommended policy solutions to these barriers.
Through secondary research and interviews, we draw the following conclusions:
1. There are several factors that could lead to a significant demand for the CAPEX loan model. The barriers to the CAPEX cash (i.e., lack of capital)
and the RESCO model, such as lack of equity with smaller developers and difficulty in raising debt for MSMEs, are some of the factors that can encourage the uptake of the CAPEX loan model.
On the demand side, the model is primarily driven by a cost imperative as the installation cost of solar energy has decreased significantly and has become cheaper than procuring from the grid in most of Indian states.
While developers may find it difficult to raise funds for projects targeting MSMEs and unrated clients, the customers themselves can leverage their existing banking relationships to raise debt for solar installation. This is another major driver.
Customers can also take advantage of accelerated depreciation, offsetting their tax liabilities in the initial years.
- However, there are barriers and challenges that need to be addressed to expand the possible use of the model. The biggest barrier that the model faces for MSME clients is perceived lack of creditworthi- ness due to lack of credit information/ratings. This barrier is further aggravated by the high transaction cost/time of MSME rooftop loans due to their small size, decreasing their attractiveness to lenders. Lack of awareness on the part of MSMEs and perceived performance risk of solar generation are other important barriers that can limit the expansion of the model’s use.According to the lenders, MSMEs are often over-leveraged in terms of their borrowing, which makes it difficult for them to borrow for solar installations. MSMEs themselves may be unwilling to invest a sizeable portion of their capital (through equity or taking additional debt) in a non-core business activity that ties up capital for long periods of time.
- Market solutions could help overcome these barriers. We identify and prioritize policy solutions for key barriers in Table ES1, based on factors of potential impact and implementation feasibility. These solutions cater specifically to the top two barriers identified in the study. The other barriers, although important, need further research and discourse. CPI, through its future work, intends to continue to work and delve deeper to find potential solutions to these barriers.
There are also certain other policy solutions, like increasing the limit for net-metered solar plants and devising clear timelines for benefits, that could help create a more favorable environment for rooftop solar. Coupled with the solutions discussed above, these solu- tions could open more opportunities for solar uptake in the MSME sector.
- Introduction 6
- 1.1 Dominant business models in rooftop solar: CAPEX and RESCO 6
- 1.2 Challenges with existing models 7
- The CAPEX loan model: A potential solution to scale-up rooftop solar for Micro,
Small and Medium Enterprises (MSMEs) in India 9
- 2.1 The CAPEX loan model 9
- 2.2 Advantages in comparison to the existing models 9
- Barriers to scale-up the CAPEX loan model 12
- 3.1 Lack of interest by the lenders 12
- 3.2 Lack of awareness among the MSMEs 13
- 3.3 Inability of MSME to absorb additional debt 13
- 3.4 Opportunity cost of the investment 13
- Solutions and policy recommendations 14
- 4.1 Challenge 1: Lack of interest by the lenders 14
- 4.2 Challenge 2: Lack of awareness among the MSMEs 18
- 4.3 Challenge 3 and 4: Inability to absorb additional debt and opportunity cost of the investment 18
- 4.4 Other recommendations 18
- Conclusion and way forward 19
- References 20
- Appendices 21
- 7.1 Appendix 1: Policy barriers 21
- 7.2 Appendix 2: Credit Guarantee Mechanism 21
- 7.3 Appendix 3: Financial analysis 22